Tuesday, 20 June 2017

What’s next? – GOLD, OIL 20.06.17

Gold prices were almost unchanged in Asian hours on Tuesday, as investors continued to focus on speeches from FOMC speakers due to a thin economic agenda.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery were trading up by 0.07 percent at $1247.60 a troy ounce as of 07:30 GMT. In the previous session, bullion contracts ended down 0.7 percent at nearly the current level.

The yellow metal settled in red territory on Monday, as the dollar remained strong following hawkish remarks from New York Fed president Bill Dudley.

The influential policymaker said he was happy with the latest rate hike. He explained that stopping the monetary normalization process at this stage could present serious risks for the US economy. Dudley said he expects wages to accelerate its growth in the short term.

"Inflation is a little lower than what we would like, but we think that if the labor market continues to tighten, wages will gradually pick up and with that, inflation will gradually get back to 2 percent," said Dudley at a meeting with business leaders in Plattsburg, New York.

Last week, the Federal Reserve increased its short term rates by 25 basis points to a range between 1.00 and 1.25 percent, marking the second hike in 2017. The US regulator also said a third hike is still possible if economic conditions support the case.

Higher rates environments put gold under pressure as market participants fell more interested on risky assets than safe-havens, while a strengthening dollar also weighs on the metal.

Ahead in the session, first-quarter current account is set for release as of 08:30 GMT. FOMC members Rosengren, Stanley Fischer and Kaplan are due to speak at 07:45 GMT, 08:00 GMT and 15:00 GMT respectively.

OIL

Oil prices were higher on Tuesday early trading, trying to recover some positions from previous session losses as market players turned their focus to fresh inventory data.

The US benchmark West Texas Intermediate oil futures traded at $44.55 a barrel, up 0.27 percent from its prior close. Meanwhile, the London-based Brent crude oil futures soared 0.28 percent to trade at $47.04 a barrel as of 07:30 GMT.

On Monday, oil benchmarks settled lower, with the WTI contracts falling 1.2 percent to $44.20 per barrel and the Brent futures easing 0.82 percent to $46.98 a barrel.

Saudi Energy Minister Khalid Al-Falih once again tried to downplay the impact of increasing crude output from Libya, Nigeria and most importantly, the United States.

“The forecasts that the oil market will re-balance in the fourth quarter have taken into consideration the rise in shale oil production,” said Al-Falih, while adding that Libya and Nigeria are producing within the levels agreed in Algeria.

OPEC’s de facto leader insisted that the rising US shale production would not derail the production cuts meant to push prices up by rebalancing global supply levels.

According to OPEC’s last week report, the oil group rose by 336,000 barrels per day its production level in May to 32.14 million barrels per day.

Investment bank JP Morgan downscaled its 2018 crude forecast for WTI from $53.50 to $42, while the estimation for Brent went from $55.50 to $45.